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Lithuania: emerging from the shadows

Published
Jan. 27 2016 02:28 PM
By
Colette Doyle

Vilnius panorama

The largest of the three Baltic States, Lithuania has changed dramatically in 20 short years, moving away from the shadow of Soviet rule to build up a buoyant market economy and become a hotspot for start-ups from around Europe, as Colette Doyle discovers

Lithuania is currently among the fastest-growing countries in the EU, with GDP forecast to increase by two per cent year on year, having grown by 3.3 per cent in 2013. The country is the second most favourable country for investment in Europe according to the Foreign Policy Baseline Profitability Index, it can boast some of the lowest office rental costs in the whole of Central and Eastern Europe and has the fourth lowest profit taxes in the EU.

Lithuania’s strategic location is another advantage that it is keen to capitalise on: Simonas Satunas, Director of the External Economic Relations Department at the Ministry of Foreign Affairs, points to the “great logistics” in the country as the reason behind its success in attracting foreign investment, noting that a number of IT companies have relocated from Russia to do business there. “In spite of the sanctions on Russia, investors are not afraid of the challenges,” he notes.

In terms of logistics, he enumerates the all-year-round, ice-free port at Klaipeda, plus the fact that the railway system uses a twin gauge (European and Soviet) so that goods can go directly to China, which is a big advantage as it cuts down hugely on transportation times. In fact, logistics accounts for nearly 12 per cent of Lithuania’s GDP.

An educated population is another factor – its workforce of 1.5 million has the highest education level in the EU and there has been a 40 per cent increase in applications for technical subjects and IT studies; collaboration between industry and academia is a big selling point and the country leads the entire CEE when it comes to cooperation between the two. In addition, more than half the population speaks at least two foreign languages – English tops the list, closely followed by Russian.

Satunas dismisses other neighbouring Baltic states as “one-city countries”, pointing out that Lithuania can offer a more fully rounded experience to foreign businesses since, as well as the capital Vilnius, there is the city of Kaunas, which is an important centre of industry, trade and services. There are also five integrated science, study and business valleys, as well as five special economic zones, which offer a range of benefits including zero per cent corporate tax for the first six years of operation of the business, plus a 50 per cent discount for the following four years.

The British presence in the country is notable and there were 140 investors from the UK in 2012, who contributed just under €220,000 (£167,000) to the local economy and who represented sectors as diverse as finance, construction, real estate and ICT. In fact, the IT sector is a real success story, with nearly 30 IT development companies having chosen Lithuania since the start of 2013, including Google, Uber, Revel Systems, Game Insight, Wix.com and many more.

Rimante Ribaciauskaite, project manager at Enterprise Lithuania, points to the “really great base material” and believes that in time the country could come to be regarded as “the Silicon Valley of Eastern Europe – everybody speaks English and nearly 95 per cent [of the population] have a higher level of education. We are learning and we are ready – Barclays is here, Western Union has its biggest office outside the US in Vilnius.” Notable start-ups include TransferGo, an international money transfer service featured in Informilo’s Top 25 hottest fintech start-ups and the online marketplace for second-hand clothing, Vinted.

One British firm that has made its home here is Barclays, which set up its technology centre in Vilnius in 2010, employing more than 1,200 IT professionals and providing a 24/7 service globally. Four years later the company opened an HR centre, employing a team of around 100 to service its international operations. Director of HR Services Mariano Andrade Gonzalez outlines some of the reasons that prompted the banking giant to choose Lithuania.

“It’s an easy environment to do business in, there’s a lot of talent here, plus a good attitude and a flexible mindset,” comments Gonzalez. He adds: “In terms of labour costs it’s not as cheap as somewhere like India, but the competence on offer means the move made sense.” It’s a convenient location too, as he notes, with the UK just a two-and-a-half hour flight away. There was also an additional factor that helped clinch the deal: “There was a real willingness to do business with us – we were offered a government grant to help us set up that wasn’t available in any of the other locations we were considering.”

Culturally too, Barclays found the climate in Lithuania was a good fit: “there is a great level of respect and the fact that most people speak at least a couple of other languages means that staff can easily adapt to requests from around the world.”

On a personal level, Gonzalez talks favourably about the work/life balance on offer here; most employees can afford to live relatively near the office, without the tedious commute that is commonplace in most big European cities: the Mercer Cost of Living Index places Vilnius among the top five least expensive EU cities to live in for expatriates.

British companies are drawn to Lithuania because of the ease of doing business there; this was highlighted by the World Economic Forum’s Global Competitiveness Report, which finds that it is far easier to start a business in Lithuania than the UK. That’s probably one of the reasons behind Yorkshire company Camira Fabrics’ decision to open a factory there, producing bales of brightly coloured material for that most iconic of British institutions: the London Underground. The management here suggests that the available talent pool, central location and reasonable operating costs are others factors.

Over in Kaunas, at Call Credit, which specialises in credit-checking for business, manager Dainius Aksinavicius notes that “there was a lack of talent in the Leeds area [where Call Credit has its headquarters], so they made the decision to look outside the UK”. One of the reasons that Lithuania was deemed suitable is because, according to Aksinaviciusk, the IT infrastructure is one of the best in Europe. The figures back him up: the country benefits from the leading broadband speed in the EU, it has the third most affordable internet in the region and is ranked fourth globally in fulfilling business needs for ICT.

Plus, the growth in the number of IT students at Lithuanian universities from 6,200 in 2011 to 7,600 in 2014 – a rise of more than 22 per cent – means that there is a significant pool of suitably qualified young graduates from whom to choose. The country’s academic institutions are also flexible in their approach, as he points out: “they’re willing to adjust their curriculum based on business needs”. The cost-quality ratio also influenced Call Credit’s decision to set up in the Baltic State – “there are some minor cultural issues, but generally it [Lithuania] is well aligned with British values”.

British employee Tim Webster is endearingly enthusiastic about his stint in the country and has taken his adopted nation so much to heart that he has set up a podcast to encourage other expatriates to learn the local language. “The hospitality is so genuine here, you make really close friendships and it’s much less superficial than somewhere like London. It’s nice to see how patriotic people are and how much they’re attached to their traditions.” Yet more reasons to consider, in the words of national promotion agency Invest Lithuania, “a country as ambitious as you are”.